When an employer hires a worker, the law requires that taxes be withheld from the employee’s paycheck. To properly calculate the amount to withhold, the employer must use the worker's Form W-4 and the IRS's withholding tax tables. The employee must complete a Form W-4 upon being hired (or whenever any tax status changes).
Obtaining a Form W-4
Your employer should give you the Form W-4 upon hiring you, or you can also obtain the form for the current year by going to the IRS’s website. It can be found under “Forms and Publications.”
Completing the Form W-4
Put your name, address and social security ID in the appropriate boxes. Select your filing status (such as single or married). Calculate how many withholding allowances you want to claim. Generally, the more withholding allowances you claim, the less federal taxes you will pay. Over-claiming may result in owed taxes.
If you do not complete a Form W-4, your employer can list you as single with zero allowances, which requires the most withholding. To claim “Head of Household,” you must be single, and you must be financially responsible for more than half of the costs required to take care of yourself and your dependents.
Each dependent can only be claimed once by one individual. You are eligible to receive a child tax credit if your income is within the designated bracket: for 2010, no more than $61,000 if you are single and no more than $90,000 if married. If you have two or fewer children, you can claim two allowances per child. For three or more children, you can claim one allowance per child. For six or more children, check the Form W-4 for the income bracket specifying the maximum allowances you can claim for each child.
If you have multiple jobs, if your spouse is employed or if you have itemized deductions, complete Page 2 of the Form W-4.
You can claim exempt from federal income tax on your Form W-4 under the following circumstances: if you were entitled to a full federal income tax refund the previous tax year because you had no tax liability; and you anticipate getting a full federal income tax refund for the current year because you estimate that you will have no tax liability.
You can use the IRS withholding calculator to assist you in completing the Form W-4. The withholding calculator will calculate your expected income tax for the year and can help you avoid paying too little or too much in taxes. If you will end up owing the IRS, the calculator can help you determine the correct adjustments for your W-4. Have your most recent pay stub and income tax return handy to use the withholding calculator.
- Internal Revenue Service: Can You Claim Exemption From Withholding On Form W-4?
- Drake Enterprises: Form W-4
- Young Money: Completing a W-4 & How Federal Taxes Are Withheld from Your Paycheck
- Internal Revenue Service. "Topic No. 753 Form W-4 – Employee's Withholding Certificate." Accessed Sept. 22, 2020.
Grace Ferguson has been writing professionally since 2009. With 10 years of experience in employee benefits and payroll administration, Ferguson has written extensively on topics relating to employment and finance. A research writer as well, she has been published in The Sage Encyclopedia and Mission Bell Media.